Legal Nigeria

Amid VAT uproar, states sue FG over sharing of stamp duties

By Kehinde Olatunji , Ameh Ochojila , Murtala Adewale , Rotimi Agboluaje and Abdulganiyu Alabi

• Surprise trails ‘speedy’ passage of Lagos VAT, open grazing bills
• Wike started a revolution, restructuring has begun, says Adegboruwa
• Oyo still studying VAT verdict
• Kaduna says it won’t go against FG, court decisions
• Kano keeps mute as stakeholders bemoan declining IGR
• Stop impeding true federalism, Afenifere tells FG

Amid raging controversy over the collection of Value Added Tax (VAT), the subtle campaign for restructuring through fiscal federalism was raised a notch higher, yesterday, as Attorneys-General of the 36 states pushed the envelope by using the Attorney-General of the Federation (AGF), Abubakar Malami, over alleged failure of the Federal Government to remit funds generated from stamp duties into states’ account.

The states are arguing that they are the sole authority to collect stamp duties and not the Federal Government. This is coming at a time when there is a conflict between some states and the Federal Inland Revenue Service (FIRS) over the collection of VAT.

The 36 states have gone before the Supreme Court to ask for, among others, an order compelling the Federal Government to account for funds collected by way of stamp duties on individual persons’ transactions in states from 2015.
 
The states want the apex court to order the central government to refund N176,067,400,000, being “the ascertained and admitted collected stamp duties on individual persons’ transactions within the respective states for the period of 2015-2020” in addition to what would be ascertained later.
 
The states equally want the Supreme Court to restrain the Federal Government or its agents from appointing anyone to collect stamp duties on individual persons’ transactions within the respective states. These form part of the reliefs sought in a suit marked: SC/CV/690/2021 filed before the Supreme Court. 

The states are of the view that by virtue of the mandatory provisions of Section 4(2) of the Stamp Duties Act, they (the states) are the sole authorities empowered to administer and collect stamp duties on all transactions involving individuals/persons within their respective states.

The plaintiffs, while raising some questions for the court’s determination, are praying for the following reliefs: A declaration that the plaintiffs are the sole authorities entitled to administer and collect stamp duties on all transactions involving individuals within their respective states; a declaration that the defendant is not entitled to collect, administer, or keep the proceeds of any stamp duties on transactions involving individuals within the respective states of the plaintiffs or in any manner interfere with the plaintiff’s right and authority in the administering the provision of Section 4(2) of the Stamp Duties Act Cap. S8 Laws of the Federation of Nigeria.

A declaration that the plaintiffs are entitled to 85 per cent of all stamp duties collected on electronic money transfer levy, electronic receipts, or electronic transfer for money deposited in deposit money banks and financial institutions, on any type of account to be accounted for and expressed to be received by the person to whom the transferor deposit is made in the plaintiffs’ respective states.

An order of injunction directing the defendant to account for and pay back all monies and collected by way of stamp duties on individual persons’ transactions within the respective states of the Plaintiffs from the period 2015-2020, and thereafter, till the time of the judgment.

The suit, filed on August 24 this year, is yet to be slated for hearing by the court currently on its yearly vacation.

The same 36 states had on June 16 this year, filed a separate suit before the Supreme Court, marked: SCN/CV/393/2021 in which they want the court to among others, compel the Federal Government to account for the about N2.28 trillion (both in cash and assets) so far recovered from looters since 2015.

They claimed, in the suit, which also has the AGF as the sole defendant, that between 2015 and now, the FG has recovered about N1.8 trillion in cash and about N450 billion worth of non-cash assets, but has allegedly diverted same into the Consolidated Revenue Accounts and other accounts not recognised by the Constitution, as against the Federation Account (FA) as required.

The plaintiffs equally want the court to compel the FG to give a detailed account of the recovered assets and remit the same into the FA, and for the Revenue Mobilisation and Fiscal Commission (RMFAC) to design modalities for distributing the recovered loot among the federating units.

FOLLOWING the Port Harcourt court judgment on VAT, the Lagos State House of Assembly, yesterday, passed the state’s VAT bill and the bill that prohibits open cattle grazing into law.
 
At the plenary session, the Speaker of the Assembly, Mudashiru Obasa, directed the Acting Clerk of the House, Mr. Olalekan Onafeko, to transmit a clean copy to the governor, Babajide Sanwo-Olu, for assent. The two bills were passed after unanimous votes by the lawmakers at the sitting where they were read the third time.
 
The state government had presented the VAT bill to the Assembly last week. The bill was given an accelerated hearing by the House on Monday, which culminated in its passage yesterday.
  
Immediately after the passage, Obasa commended his colleagues for their passion to see that the state continues to grow. “I thank you all for this historic exercise,” he said.

Controversies have, however, trailed the passage of VAT bill. On Wednesday, the House held separate public hearings on the bills while stakeholders pointed at some issues that needed to be amended before it was made a law in the state.
 
The lawmakers had promised to make necessary adjustments, but, surprisingly, the bills were passed into law yesterday, making stakeholders ask questions on the haste in the passage of the bill.
 
Specifically, the Executive Director of Consumer Rights Advocacy Centre, Comrade Adeola Samuel, said: “I was surprised when I got here (Lagos Assembly) and it was discovered that the plenary session was to pass the bill into law. I was surprised because just yesterday (Wednesday), they asked people to send in their memoranda and necessary points to be added to the bill before it is passed as law, they even gave a deadline which was three days.

“It is surprising that all of a sudden, they have passed the bill. So, what will happen to the issues that were raised? Why the haste? If you look at the point that I raised on both public hearings, you will notice that they are all germane and on the point of law. They did not consider the fact that Rivers State did not just wake up to make bills, they took the necessary steps. How can you benefit from a case you are not part of?

“As far as I am concerned, they have just opened ground for litigation. They have given FIRS another leeway to take them to court. They might believe that they will not win the case but they will use it to frustrate implementation of the law that has just been passed.”
 
However, the Commissioner for Information, Gbenga Omotoso, said he didn’t see anything hasty or wrong in what the Assembly did by passing the bill into law within a week since it had its first, second reading, and public hearing. He maintained that it was within the right of the Assembly to go through the process of making laws and they were just doing their jobs.

“The question you should ask is, was the due process followed or not. So, you would have wanted them to procrastinate till next year. If you can produce your newspaper in one hour, why wait till 15 hours. What you should be talking about is the process.”

On whether the issues raised at the public hearing have been addressed, Omotoso said: “How will you know that the corrections have not been made, did you attend their committee meeting, do you know if the amendment was made there. They don’t need to tell the public that the amendment has been made or do another public hearing on that. What is important is the process. It’s a legislative matter, they have the right and it is exclusive to them.”
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When asked if the law would be effective immediately, he said, “it is left for the Assembly to send it to the executive and once it gets to the executive, it is the duty of Mr. Governor to either sign or not. I believe that when it gets to the governor, he will sign it. I don’t want to believe there was unnecessary haste.”

GOVERNOR Seyi Makinde of Oyo State, yesterday, said his administration is still studying the verdict obtained by the Rivers State Government on VAT. Makinde who spoke through his Chief Press Secretary, Taiwo Adisa, maintained that an evaluation of the ruling is being done by the relevant ministries.

He noted that only the Ministry of Justice could advise the state government on what to do, insisting that the state is waiting for the evaluation of the judgment before it can take any step.
IN Kaduna State, the Accountant General, Mrs Shizzer Bada, said the state will not go against the decision of the Federal Government on VAT collection.

Addressing the press after a retreat organised by the state’s Ministry of Finance on the public presentation of citizen’s accountability report to stakeholders, she said while Kaduna ranks among the highest Internally Revenue Generating (IGR) states in the country with N50.7 billion generated in 2020, the state will wait for a final decision on VAT collection from the court.

BUT Kano State was not forthcoming, yesterday when asked about its position on the VAT controversy. Commissioner for Budget and Planning in the state, Alhaji Nura Mohammad Dakadai, who was not categorical, cleverly referred The Guardian to the Board of Internal Revenue for response. Several calls and text messages placed to the chairman of the board, Alhaji Abdulrazak Datti, were not responded to.

Stakeholders had gathered yesterday to raise the alarm over the steady fall of Kano IGR despite the volume of commercial activities that exchange hands daily basis in the state.

Although Kano is rated as the economic hub of Northern Nigeria and some neighbouring African countries with huge commercial and business transactions that run into billions of naira, the present IGR, however, indicates a sharp contrast.

The 2020 Annual State Viability Index (ASVI) released by Economic Confidential shows that Kano generated over N31 billion in IGR in 2020, as against over N40 billion generated in 2019. The report indicated that states like Kaduna, Ogun, Oyo, and Federal Capital Territory that are less endowed in population, size, and other market value indices performed extremely better in terms of revenue generation than Kano.

MEANWHILE, the pan-Yoruba socio-political organisation, Afenifere, yesterday, called on the Federal Government to stop its actions and policies that are impeding the practice of true federalism in Nigeria. This was contained in a statement made available to journalists and signed by its National Publicity Secretary, Comrade Jare Ajayi, in Ibadan, the Oyo State capital.

The Yoruba group also lauded the Rivers State Government for initiating the legal process, leading to the landmark victory.

According to Afenifere, the rulings by Justice Stephen Dalyop Pam of the Federal High Court, Port Harcourt on August 9 and September 6, this year have earned the judiciary an epaulet as an institution that is not only capable of ensuring justice but is actually working on deepening federalism in the country.

“Afenifere observes that the manner of distributing VAT revenue is patently unfair, unjust, and is pitted against the hardworking while rewarding the indolent by a manner of speaking. For instance, Lagos, which generates as much as 55 per cent of this revenue receives less than 10 per cent, while most states where less than five per cent is generated get the same amount that Lagos gets. It is quite distasteful.

“The sum collected by the FIRS is shared among the three tiers of government, with the Federal Government taking 15 per cent, states 50 per cent; local governments, 35 per cent. From the foregoing, it would be seen that the Federal Government is taking an undeserved larger chunks because when 50 per cent is shared among the 36 states, what each state gets is a paltry sum. Same for 774 local councils that share 36 per cent.”

Ajayi further called on the state governments to use the opportunity provided by these landmark judgments to explore other areas that the Constitution empowers them to assert themselves as federalists.
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Also, a human rights lawyer, Ebun-Olu Adegboruwa (SAN), has backed Governor Nyesom Wike of Rivers State and his Lagos counterpart, Babajide Sanwo-Olu, for championing the agitation for fiscal federalism for states in the country.
 
Adegboruwa, in a statement made available to The Guardian, said the collection of VAT by states is a “form of restructuring”.
 
The lawyer, who commended the Rivers State governor for starting a “revolution”, said enough of “feeding-bottle federalism and Abuja financial pilgrimage!”

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